The 9% Vat rate has been broadly welcomed by the tourism and hospitality industry since its introduction in July 2011 as part of the Jobs Initiative.
When I originally announced the Jobs Initiative in 2011, I made it clear that the effects of the VAT reduction would be reviewed before Budget 2013 to ensure that it encouraged employment in the affected sectors. This analysis of the VAT rate reduction, carried out by my Department, looked at the rate of pass through to final consumers and the employment effects. It demonstrated that prices in the basket of goods and services covered by the Jobs Initiative had fallen relative to non-Jobs Initiative goods and services even after removing the effects of rising energy prices.
The most recent Quarterly National Household Survey results from the CSO indicate that the current level of employment in the Accommodation and Food Services sector has increased by 22,300 (20%) since the introduction of the reduced 9% VAT rate. Over the same time period, employment in Construction has increased by 19,500 (17%).
The estimated cost to the Exchequer of the reduced 9% VAT rate, since its introduction in 2011 to end 2014, is €1,533 million.
